ROTTWEIL, Germany (Reuters) - Thyssenkrupp (TKAG.DE), trying to transform itself into a technology group, is attracting strong demand for its next-generation elevators, which operate without steel cables or ropes, it said on Friday.
Based on magnetic-levitation technology developed for high-speed trains, the MULTI elevator moves from shaft to shaft with multiple cars in each, offering the potential to revolutionize the way people move within high-rise buildings.
The German group is banking on MULTI as well as internet-connected elevators as it strives to become a technology conglomerate and shift away from its core steelmaking business, which it plans to merge with Tata Steel (TISC.NS).
“Demand is gigantic,” Andreas Schierenbeck, chief executive of Thyssenkrupp Elevator, the group’s most profitable business unit, told Reuters.
The company plans a gradual introduction of the MULTI, he said, aiming for two or three more initial customers to follow the first order announced for a high-rise building in Berlin.
“Demand is currently much higher than what we have in mind,” Schierenbeck said in Rottweil, where Thyssenkrupp operates its MULTI test tower, adding that a much broader customer base would be targeted once the product is established on the market.
Thyssenkrupp Elevator lifted adjusted earnings before interest and tax (EBIT) by 8 percent to 860 million euros ($1 billion) in the financial year to Sept. 30 last year, accounting for 59 percent of the group total.
Competing with Otis (UTX.N), Mitsubishi Electric (6503.T), Kone (KNEBV.HE) and Schindler (SCHP.S), the elevators business is Thyssenkrupp’s most profitable division with an adjusted EBIT margin of 11.5 percent.
Schierenbeck confirmed that the margin would grow by 0.5-0.7 percentage points in the year to Sept. 30 2017, for which Thyssenkrupp is scheduled to report results on Nov. 23. This would bring the margin to 12-12.2 percent.
He also said it had targeted adjusted EBIT of 1 billion euros before 2020 and a margin of 15 percent at a later stage.
Demand in the United States was good and stable, Schierenbeck said, adding that China was difficult because of “enormous” pricing pressure amid fierce competition in a shrinking market.
Thyssenkrupp Elevator makes 30 percent of its revenue in Europe, its second-biggest sales contributor behind the Americas, but does not provide a more detailed breakdown.
“We’re also a little worried about Spain due to the current political situation,” Schierenbeck said, referring to the crisis sparked by Catalonia’s independence referendum, which was ruled illegal by Spain’s constitutional court.
“They had healthy growth and ... this could be threatened a bit,” he said.
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Editing by David Goodman and Elaine Hardcastle